EUR/USD holds firm as weaker US economic data and yields weigh on USD
Softer US macro data and falling Treasury yields have eroded the dollar's carry advantage, allowing EUR/USD to hold firm near 1.1500. The move reflects a broader reassessment of Fed policy timing, with the market now pricing a higher probability of rate cuts by mid-2026. For EUR/USD, the key question is whether this repricing can push the pair decisively above the 1.1600 resistance, or if Fed speakers will push back to defend rate differentials. Our consensus targets imply a 2-4% upside from current levels, but the wide firm-level spread suggests conviction remains low.
Where it sits in our coverage
Our consensus EUR/USD target sits at 1.1800 (median across 8 firms for Mar26), with Morgan Stanley at the upper bound (1.2000) and BofA/Barclays at the lower (1.1700). The headline's bullish EUR view aligns more closely with the upper half of the range — JPMorgan, Goldman, ING, and MUFG all target 1.1800 or higher for Mar26.
How firms align
Goldman and Deutsche Bank share the headline's constructive EUR bias, both with Mar26 targets at 1.1800 and Dec26 targets at 1.2500 (our highest). BofA and Barclays are more cautious, holding Mar26 targets at 1.1700 and Dec26 at 1.2100-1.2200. Morgan Stanley stands out with a bullish Mar26 (1.2000) but a bearish Dec26 (1.1600), suggesting a reversal later in 2026.
What the data shows
All eight firms revised their EUR/USD forecasts on 2026-05-04, with only Morgan Stanley showing a significant directional divergence — their Mar26 target is the highest, but Dec26 is the lowest. This intra-firm dispersion underscores the uncertainty around the medium-term path. Our recent insight (/research/eurusd-consensus-divergence-may-2026) highlights that consensus sits 3.87% above spot, a gap that typically signals limited near-term upside without a catalyst.
How firms align with this view
Aligned with the headline view
Contrary positioning
Key takeaways
- 01EUR/USD holds 1.1500 as US yields compress; next resistance at 1.1600.
- 02Fed speaker tone is the near-term driver — any pushback on rate cuts caps EUR upside.
- 03Consensus median at 1.18 (Mar26) implies ~2.6% upside, but Morgan Stanley's split view adds dispersion risk.
- 04Dec26 consensus at 1.22 vs spot 1.15 highlights bullish medium-term bias, but requires catalyst to close gap.
Market implications
Watch for Fed speakers this week, particularly Chair Powell's testimony on Thursday. A dovish tilt could push EUR/USD through 1.1600, while hawkish pushback risks a retest of 1.1400. Our consensus at 1.1800 for Mar26 suggests traders should look to buy dips below 1.1450.
Risks to this view
A sudden reversal in US yield compression — e.g., strong CPI data or hawkish Fed guidance — would restore USD carry appeal and invalidate the EUR bullish view. Also, a sharp deterioration in Eurozone growth data (e.g., PMI softness) could drag EUR/USD below 1.1400, breaking the current support.
Sentiment by currency
USD-EUR+JPY~GBP~Composite USD score: -0.55
Sources & References
How we cover this story
Other coverage on this pair
EUR/USD strengthens as mixed US labor data and hopes for a US-Iran deal pressure the Greenback.
Soft US labor print reduces Fed rate-hike conviction; geopolitical risk-off from Iran talks risk-off flows weaken USD safe-haven demand.
EUR/USD: Recovery eyes full retracement – Scotiabank
EUR/USD recovery momentum suggests technicians are positioning for mean reversion toward recent highs, indicating potential USD weakness into resistance.
EUR/USD: Binary path around Gulf deal – ING
EUR/USD: Oil shock, real rates and conflict risks – Commerzbank
Oil shock transmission via real rates and geopolitical premium widens USD carry advantage; EUR structural support erodes as terminal rates diverge.
Cross-firm research
EUR/USD Trades 3.87% Below Consensus: What the Gap Reveals
EUR/USD spot at 1.1727 sits 3.87% below the eight-firm median Dec-26 target of 1.22, exposing a structural divergence that demands explanation.
EUR/USD Consensus at 1.22 While Spot Sits 3.87% Below
Eight sell-side firms hold a median Dec-26 target of 1.22 for EUR/USD while spot trades at 1.1727, a gap that demands explanation.